Lower Gasoline Prices: An Obama Christmas Present?

Regular unleaded (ethanol diluted) gasoline is selling at $2.53 locally. We like it, of course, but why are gasoline prices coming down while everything else is going up?

Is it because the Keystone XP pipeline will bring low-cost Canadian crude to Texas for refining and distribution? No. President Obama will not permit it.

Is it because of increased production in the ANWAR oil fields of northern Alaska? No, that’s going to Japan and China.

Trending: Chinese Buying Land In US Communities All Over America

Is it because of increased off-shore exploration and production? Hardly. The Obama administration has seriously curtailed off-shore production ever since the BP oil spill several years ago.

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Maybe increased Brazilian production? After all, we did provide them a $2 BILLION loan guarantee to enhance their off-shore exploration, so we must be getting something in return. No, we don’t get any oil from Brazil. Don’t know why we did that.

Did the Obama administration open up some of the vast government lands to shale oil production? No, the Administration has outlawed that.

So what’s happening? Well, our good friend Saudi Arabia, the country from which the 9-11 bombers originated, is at it again. They have cut the price of their crude to the lowest levels since 2010. Have they finally decided to respond generously to Mr. Obama’s gracious bowing in their King’s esteemed presence? Do they feel guilty over the 9-11 bombing? Well, not quite.

You see, in spite of the Administration’s best efforts, shale oil industry “wildcatters” in West Texas and North Dakota have the USA on the verge of becoming oil independent, and our Middle Eastern friends don’t like it a bit. After all, they have been living in luxury off the American oil market for decades, and they’re kinda’ used to it! So they see our domestic production of shale oil products as a threat to their standards of living. So what do to? Crush it. Put the shale oil producers out of business — then raise the price!

In July, 2008, the world price of crude oil was $147 a barrel with the US purchasing 22.5% of it. So at that price, the hydraulic fracturing of oil-bearing shale, known as “fracking,” boomed on private lands in West Texas, North Dakota, and other places not yet prohibited by environmental regulation.

This past Thanksgiving Day, members of the Organization of the Petroleum Exporting Countries (OPEC) met in Vienna, as is their custom, to set world market prices for their crude oil production. With crude currently selling at around $75, many of the smaller OPEC members wanted to curb production, and thus force higher prices on the world market — just like in the good old days. But Saudi Arabia, OPEC’s most powerful member, had other ideas.

A recent analysis by Bloomberg New Energy Finance finds that shale oil fracking in 19 regions across Texas, Oklahoma, Louisiana, Kansas, and Arkansas stop being profitable at $75 a barrel, which is roughly where things are at the moment.

But the Saudis enjoy some of the lowest production costs in the world. They can make money at $50 a barrel. So they are perfectly willing to see the price drop even more to drive the US “frackers” out of business. Another $10 – $15 per barrel should do the trick.

Impossible? Not at all. In fact, it is an excellent response to President Obama’s bowing expression of submission to the majesty of the Saudi King Abdullah. Their action plays right into Mr. Obama’s program of inhibiting the production of any sort of US fossil-based fuels; oil, gas, coal, etc.

Once the “frackers” are eliminated, world crude prices will “skyrocket,” to use Mr. Obama’s terminology. It will help fulfill the stated objective of his Energy Secretary, Dr. Steven Chu, to have unleaded gasoline prices of $7 to $9 a gallon, thus forcing Americans to buy alternative energy cars and sub-compacts. 

So enjoy it while you can. Like most Obama “gifts,” it won’t turn out to be what you think it is.

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